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Last night EU leaders finally resolved a standoff with Hungary and Poland over a landmark stimulus package for the region. Not sure why it matters? Here's why. 1/10 https://www.bloomberg.com/news/articles/2020-12-11/here-s-why-the-stimulus-deal-is-such-a-big-deal-for-europe?sref=2eap69Y7
Firstly the size. EU leaders agreed on not only the budget for the next seven years, but also a recovery fund. Together that takes the size of the amount of money agreed on to around 1.8 trillion euros. Here's our story on the breakthrough 2/10 https://www.bloomberg.com/news/articles/2020-12-10/eu-leaders-approve-2-2-trillion-stimulus-backed-by-joint-debt?sref=2eap69Y7
The recovery package is quite an achievement. While it's not quite a `Hamiltonian moment' - a reference to what happened in the U.S. in 1790, which would involve mutualizing of obligations across all 27 member countries - it's a step in that direction 3/10 https://www.bloomberg.com/news/articles/2020-12-11/here-s-why-the-stimulus-deal-is-such-a-big-deal-for-europe?sref=2eap69Y7
Along with ECB bond-buying, it's helped to rein in the borrowing costs of Europe's most indebted nations. Portugal can now issue 10-year date at a rate of... 0% 4/10 https://www.bloomberg.com/news/articles/2020-12-08/portuguese-benchmark-bond-yields-drop-to-0-for-first-time?sref=2eap69Y7
In terms of the economy, the European Commission estimates the plan could add around 2% to the bloc’s output by 2024 and create 2 million additional jobs by 2022 5/10 https://www.bloomberg.com/news/articles/2020-12-11/here-s-why-the-stimulus-deal-is-such-a-big-deal-for-europe?sref=2eap69Y7
And it will help the ECB to do its job, by boosting inflation toward target and giving the institution more bonds to buy. That's good, because there are signs it's killing the market 6/10 https://www.bloomberg.com/news/articles/2020-12-10/ecb-s-insatiable-appetite-slowly-shuts-down-europe-s-bond-market?sref=2eap69Y7
Up until now, German bonds have been seen as the benchmark for Europe. New joint-issued debt could see that change over time though, and even one day rival Treasuries. The euro is at its highest level versus the dollar in 2 1/2 years 7/10 https://www.bloomberg.com/news/articles/2020-05-19/europe-s-dream-of-a-safe-asset-to-rival-treasuries-gets-a-boost?sref=2eap69Y7
And possibly most importantly for the future, the fund will help underpin a green recovery. The EU will become the biggest issuer of green debt and introduce new global standards. That's needed to meet its ambitious climate goals 8/10 https://www.bloomberg.com/news/articles/2020-12-09/eu-climate-chief-is-optimistic-about-deal-on-tougher-carbon-goal?sref=2eap69Y7
The EU came up against a stern challenge from Poland and Hungary who objected to rule of law conditions tied to the new aid. That the bloc came out on top is a blow for the region's populists 9/10 https://www.bloomberg.com/news/articles/2020-12-11/here-s-why-the-stimulus-deal-is-such-a-big-deal-for-europe?sref=2eap69Y7
And to round it off, the Europe's economic architecture has possibly never been stronger, coming just a week after the euro area finally agreed on a long-awaited reform of its bailout fund. The EU has had a decent end to 2020, Brexit permitting 10/10 https://www.bloomberg.com/news/articles/2020-12-11/here-s-why-the-stimulus-deal-is-such-a-big-deal-for-europe?sref=2eap69Y7
